Financial New Year’s Resolutions

Financial New Year’s Resolutions

The new year is upon us, bringing an opportunity to reflect on the past year and look ahead to the next. If you’re one of the many Americans who wants to be more intentional about their finances this year, but unsure of where to start, here are a few ideas:

Create a Financial Inventory

This helps you determine where your finances sit currently and decide what you need to do in the coming year to reach your goals. Create a list of all your assets, including cash, investments, real estate, and even valuables like jewelry. Add to it, a list of all your debts, such as student loans, credit card, mortgage, and others. Get a copy of your credit score and credit report.

Budgeting Goals

Creating a budget is a great way to set and achieve goals in the new year. Once you’ve tallied your expected income and expenses, start adding goals and see which resources you can allocate where. Think of short-term goals like paying down credit card debt as well as medium and long-term goals, such as a down payment on a house or saving for retirement. Make a list of all recurring charges being drafted from your bank account and credit cards. You may have forgotten about a few subscriptions, or their prices may have risen without your knowledge. If you’re someone who has a hard time sticking to a budget, try making a spending plan instead. A spending plan places the focus on where you do want to spend money versus where you can’t spend money.

Create or Update Your Financial Emergency Plan

Experts recommend having 3-6 months of income in an easy to liquidate vehicle such as a savings account. If you don’t already have these emergency funds, that’s a good place to start. Take stock of your insurance coverage; do you and your family have what you need to withstand disability or another emergency? Consider drafting or updating medical and financial power of attorney documents, as well.

Retirement Goals

Review your current retirement savings plan. Are you contributing the right amount? Are you invested in the best vehicle for your needs? Consider converting your traditional IRA to a Roth IRA. If you’ve recently changed jobs you may want to rollover your 401(k) from your previous employers.

Debt Goals

With interest rates so low, this year may be the perfect opportunity to get your debt under control. Consider refinancing your mortgage or student loan debt. Make a plan to pay down any credit card debts you may have. Create a budget to see how much money you can afford to allocate to debt relief.

Savings Goals

If you don’t have 3-6 months of emergency savings, start there. If you already have your emergency funds, explore other ways of saving. If COVID-19 has you working from home, consider saving the amount you would have spent on commuting. This “found money” can feel like a windfall! Even small steps can have an impact. Increasing your savings by a seemingly nominal amount per week can make a big difference over time.

Family Goals

Determine how much you need to save for college, and consider choosing a dedicated college savings plan. If you have aging parents, it may be a good idea to start saving for long-term care or obtain long-term care insurance. You may also want to consider life insurance for yourself and your spouse, as well as creating or updating your estate planning documents.

Review Investments

Take a look at your investment portfolio. What percentage of your portfolio is invested in the stock market? Are you overweighted or underweighted in any specific sectors? Now may be a good time to rebalance (but remember, selling positions in your portfolio may come with unwanted tax implications).

No matter which New Year’s Resolution you choose, good financial habits are just that – habits – and there’s no time like the present to get started.

The information provided is for informational purposes only. It is not intended to be used, and should not be used, as the sole basis for legal and/or tax advice. Individuals should seek and rely upon the guidance and advice of their own legal and tax counsel before making any decisions regarding any planning, investment, tax concepts or strategies discussed herein. Individual circumstances may vary and results discussed are no guarantees of applicability or future performance.

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